| Nirayu Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AA+/Stable’ rating on the long-term bank facilities of Nirayu Limited (Nirayu).
The company has demerged its engineering business into a wholly-owned subsidiary, Shreno Engineering Ltd (SEL), as of August 2021, on a slump sale basis for Rs 33 crore. Further, Nirayu has provided a corporate guarantee for the bank facilities of SEL, including a term loan of Rs 75 crore for its ongoing capital expenditure (capex).
The rating reflects the strong financial flexibility of Nirayu as the holding company of the Alembic group. The rating factors in the strong reputation of the Alembic group and the healthy credit risk profile of the company. These strengths are partially offset by the modest scale of operations and susceptibility to market-related risks. |
Analytical Approach CRISIL Ratings has followed the holding company approach and has considered the standalone credit risk profile of Nirayu. Further, 50% of the non-cumulative redeemable convertible preference shares has been treated as quasi equity and the balance as debt. CRISIL Ratings has also factored in the financial support towards subsidiary, Shreno Engineering Limited (SEL; rated ‘CRISIL AA+(CE)/Stable/CRISIL A1+(CE)’) and Shreno Limited (rated ‘CRISIL A/Stable/CRISIL A1’), as Nirayu has given an unconditional and irrevocable corporate guarantee for the debt of SEL. |
Key Rating Drivers & Detailed Description Strengths: Strong financial flexibility: The financial flexibility of Nirayu is strong, supported by the market value of its investments in Alembic Pharma (rated CRISIL AA+/Stable/CRISIL A1+, 53.55% shareholding- direct holding of 35.63% and the balance through indirect holding of Alembic Ltd), Alembic Ltd (63.06%) and Paushak Ltd (rated CRISIL A-/Stable/CRISIL A1, 53.18% shareholding). The combined market value of Nirayu’s shareholding in these companies was Rs 10,641 crore as on March 18, 2022. This is substantial in relation to the company’s total debt exposure, estimated at Rs 160 crore and comprising preference shares as on March 31, 2021, leading to healthy debt coverage. The total debt exposure is expected to remain below Rs 500 crore over the medium term, including liabilities on account of corporate guarantees extended to bank borrowings by subsidiaries.
Healthy reputation of the promoters: Nirayu is a part of the Alembic group, which has a well-established management track record and reputation in the pharma industry. The promoters’ shareholding in Nirayu is unencumbered.
Weaknesses: Susceptibility to market risks: The company will remain susceptible to prevailing market sentiments and the share prices of Alembic Pharma, Alembic Ltd and Paushak Ltd. Any increase in systemic risks, leading to a sharp decline in the share price of these companies, will be a key rating sensitivity factor.
Dependence on dividend income: In the absence of the engineering business, Nirayu now largely depends on dividend income to service its debt. Any sharp decline in dividend income, as was the case in fiscal 2021, could impact the cashflows and will be a key rating sensitivity factor. Nirayu has received about Rs 102 crore of dividend income so far in fiscal 2022 as against Rs 11 crore in fiscal 2021. |
Liquidity: Strong Liquidity is likely to remain strong, with expected annual net cash accrual above Rs 75 crore as compared to yearly repayment obligations of about Rs 15 crore. Further, the company had cash and bank balances of Rs 1 crore as on March 31, 2021, expected to increase significantly as dividend income recovers in fiscal 2022. Alembic group has a strong reputation in the lending community, thus enhancing Nirayu’s financial flexibility. Moreover, CRISIL Ratings understands that Nirayu’s management would not be averse to monetise its investment in case required to support its liquidity. |
Outlook: Stable CRISIL Ratings expects Nirayu to continue to benefit from its strong financial flexibility, resulting from healthy market value of its investments in Alembic group companies. |
Rating Sensitivity factors Upward Factors
Downward Factors
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About the Company Nirayu is the holding company of Alembic Pharma, Alembic Ltd and Paushak Ltd. It was also engaged in engineering business, which was demerged into a wholly-owned subsidiary, SEL, which is focused on meeting client requirements for critical machines and processing equipment that are expensive to import, or simply not available. It caters to customers in pharmaceuticals, chemical, paper and pulp, biotechnology and food processing industries.
The Alembic group is present in diverse manufacturing fields comprising biotechnology, pharmaceuticals, chemicals, agrochemicals, glassware synthetic fibre, packaging and engineering. |
Key Financial Indicators
*CRISIL adjusted numbers |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||
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Criteria Details
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